Luceco : Earnings Document

22 March 2022

LUCECO PLC

2021 FULL YEAR RESULTS

Profit doubled over two years

Well positioned for continued market outperformance

Luceco plc ("Luceco", or the "Group" or the "Company"), a manufacturer and distributor of high quality and innovative wiring accessories, LED lighting, and portable power products, today announces its audited results for the year ended 31 December 2021 ("2021" or "the year").

1. The definitions of the adjustments made and reconciliations to the reported figures can be found in note 1 of the consolidated financial statements
2. Includes pro‐forma adjustment for EBITDA of acquired businesses, as shown in note 1 of the consolidated financial statements
3. 2020 excludes the one‐off special interim dividend of 1.7p paid in 2020 in lieu of the suspended final dividend payment for 2019

Financial Highlights

• Revenue of £228.2m:

• 1. £52.0m (29.5%) higher than 2020
  1. £56.1m (32.6%) higher than 2019
  1. Strongly outperforming a favourable market
• Adjusted Operating Profit increased by £9.0m (30.0%) to £39.0m:
• 1. More than doubled versus pre‐COVID 2019

• 1. Temporary gross margin compression from input cost inflation, as expected o Strong operating leverage on additional sales growth
     o Adjusted Operating Margin increased by 0.1% to 17.1%
• Adjusted EPS increased by 30.3% to 20.2p
• Dividends increased by 1.9p (30.6%) to 8.1p, including proposed final dividend of 5.5p

Business Highlights

• Business model enabled market outperformance and profitable growth:

• 1. Vertical integration and operational agility ensured continued customer service and share gain
• Successfully implemented selling price increases to mitigate cost price inflation
• Demonstrable success in "Grow, Innovate, Sustain" strategy:
• 1. Acquisition of DW Windsor, a leading UK‐based exterior lighting brand

1. Entry into EV charger market, a key growth opportunity for the Group, including acquisition of UK‐based

charge point supplier Sync EV for £10.0m in March 2022

1. Sustaining progress with investment in manufacturing and fulfilment
   1

ESG Success and Targets

• Carbon neutral operations in 2021
• Carbon Disclosure Project joined in 2021
• Science‐Based Target Initiative ("SBTi") to be joined in 2022
• Targeting £100m of low carbon sales by 2025

Commenting on the results, Chief Executive Officer, John Hornby said:

"Luceco has a long history of market outperformance. The accelerated progress we have made over the last two years, in which our profit has doubled, is the product of our market focus and business model. We favour RMI construction markets because of their resilience in uncertain times, and undoubtedly benefited from that focus in 2021. But it was our advantaged business model, with its inbuilt resilience and agility, combined with our "can‐do" culture, that allowed us to prosper more than most. We moved quickly, won new business and saw growth opportunities across our diversified customer base.

Such strong progress in 2021 naturally creates a tough comparative, particularly in the first half when UK residential RMI activity was at a lockdown‐driven peak. We therefore expect revenue in the first half of 2022 to be broadly in line with last year. We are mindful that recent geopolitical developments, and their associated impact on inflation, may make progress harder during the year.

We have strong positions in attractive markets with an advantaged business model and a clear strategy. We have a well‐ funded business with clear growth opportunities, particularly from our recent entry into the electrical vehicle charger market. We face the future better prepared than ever and I am confident we have what it takes to continue to outperform our market."

A webcast and conference call for analysts and institutional investors will be held at 9:30am GMT today, Tuesday 22 March 2022. To register for this event please follow this link:

https://webcasting.brrmedia.co.uk/broadcast/61e989a97eb59509ae2fc7c0

An open presentation and Q&A session for retail investors will be held via the Investor Meet Company platform on 28 March 2022 at 11:00am BST. Investors can register for the event via this link:

https://www.investormeetcompany.com/luceco‐plc/register‐investor

This announcement is released by Luceco plc and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 (MAR). It is disclosed in accordance with the Company's obligations under Article 17 of MAR. Upon the publication of this announcement, this information is considered to be in the public domain.

For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of Luceco plc by Matt Webb, Chief Financial Officer.

Note to Editors

Luceco plc ‐ Bringing Power To Life

Luceco plc (LSE:LUCE) is a manufacturer and distributor of high quality and innovative wiring accessories, LED lighting and portable power products for a global customer base.

For more information, please visit www.lucecoplc.com.

Forward‐looking statements

This announcement contains forward-looking statements that are subject to risk factors associated with, among other things, the economic and business circumstances occurring from time to time in the countries, sectors and markets in which the Group operates. It is believed that the expectations reflected in these statements are reasonable, but they

2

may be affected by a wide range of variables which could cause actual results to differ materially from those currently anticipated. No assurances can be given that the forward-looking statements in this announcement will be realised.

The forward-looking statements reflect the knowledge and information available at the date of preparation of this announcement and the Company undertakes no obligation to update these forward-looking statements. Nothing in this announcement should be construed as a profit forecast.

Use of alternative performance measures

The commentary in both the Chief Executive Officer's and Chief Financial Officer's Reviews uses alternative performance measures, which are described as "Adjusted". Definitions of these measures can be found in note 1 of the consolidated financial statements. The measures provide additional information for users on the underlying performance of the business, enabling consistent year‐on‐year comparisons.

CHIEF EXECUTIVE OFFICER'S REVIEW

Compelling financial outcomes

Luceco's performance throughout the COVID‐19 pandemic has outperformed the industry in terms of revenue, market share and profitability. Whilst our pre‐COVID financial momentum was strong, the results we have achieved over the last two years have been particularly compelling, highlighting the Group's operational agility and excellent customer service in uncertain times. I am proud that our strong culture of moving quickly and delivering what we promise has been strikingly clear in such a challenging environment.

Group revenue increased by 29.5% to £228.2m in 2021, with growth within each product group. Revenue from our largest segment, Wiring Accessories, grew 28.5% to £104.5m, supported by key business wins and increased demand, which we were able to meet given the control we have over our manufacturing and supply chain. Our sources of growth broadened beyond residential renovation activity as the year progressed, with increasing economic confidence resulting in increased demand for LED retrofits into non‐residential settings. Our LED Lighting business generated revenue growth of 27.7% to £63.2m. In our Portable Power segment, we secured business wins in the UK and Europe which contributed to revenue growth of 33.3% to £60.5m for the year.

We also achieved healthy growth across each sales channel in the year. It was an exceptionally strong start to 2021 in our Retail, Hybrid and Professional Wholesale channels, all of which benefited from a rapid post‐lockdown recovery in residential demand as consumers spent more money on their homes. In the second half of the year, we saw some natural normalisation in UK Residential repair, maintenance and improvement ("RMI") Construction markets, leading to a modest slowdown in growth within our Hybrid and Professional Wholesale channels. Growth accelerated during the year in our overseas businesses, and within the Professional Projects channel as confidence returned to UK Non‐ Residential RMI Construction markets, underlining the benefit of our sales channel diversity.

The rapid post‐lockdown recovery, whilst very welcome, led to supply constraints in our industry. Increasing optimism and buoyant demand resulted in inflationary pressures and global supply chain disruption. We navigated these issues well, succeeding in maintaining our superior customer service levels by acting quickly to maintain product availability thanks to our vertically integrated model. Price increases were successfully implemented without impacting our competitiveness, demonstrating our competitive strength and the industry‐wide impact of the associated inflation.

Supply chain challenges are still present. Recent COVID outbreaks in China have not impacted our business, but could conceivably result in some short term disruption, albeit tempered by the inventory we hold elsewhere in our supply chain. Recent devastating developments in Ukraine have triggered a further round of input cost inflation. We do not yet know the full impact, but our achievements this year highlight that we have the means to manage change well. While general inflation and tighter monetary policy may have an impact on discretionary construction, particularly in the residential sector, I have every confidence that we will continue to outperform in whatever market we are faced with.

Gross margins came under pressure for all manufacturers given inflation in raw materials and freight costs. Cost inflation increased progressively through the year, costing £13.6m in 2021 and expected to cost £25.0m on an annualised basis. We swiftly and successfully implemented selling price updates designed to offset the £25.0m annualised impact in full, albeit with an inevitable modest lag due to notice periods and order lead times.

Temporary gross margin compression from the implementation lag was mitigated by hedging arrangements, further manufacturing efficiency gains from automation, and solid operating leverage on strong sales growth. The latter is illustrated by the fact that in the last two years the Group has added no extra overheads despite £52.5m of organic revenue growth. As a result of these measures, the Group's Adjusted Operating Margin for the year was 17.1%,

3

marginally ahead of 2020 despite significant input cost inflation. Growth in revenue and margins led to a 30.0% increase in Adjusted Operating Profit to £39.0m (2020: £30.0m) and operating profit increased 19.3% to £35.3m (2020: £29.6m). Strong cash generation, particularly in the second half, led to Covenant Net Debt of 0.7x Covenant EBITDA (2020: 0.4x), below our capital structure target of 1.0‐2.0x. Our balance sheet remains strong and able to support continued investment in future growth, both organically and by acquisition. In 2021, we demonstrated our appetite for M&A through the acquisition of DW Windsor.

Strong operational performance - strength of business model

In my last review, I said that 2020 had been a year like no other. We saw further upheaval and volatility in 2021 and I must thank my colleagues for their continued dedication, resilience, and adaptability in a challenging and ever‐changing environment.

Our advantaged business model has helped us gain market share for an extended period, with market conditions in the last two years accentuating this growth. Our superior product availability has been evident throughout the COVID period and I am proud that we have remained so agile in such a challenging environment.

Our vertically integrated manufacturing and distribution model proved itself more than ever in a year defined by supply chain disruption. It enabled us to add capacity more quickly than those businesses reliant on outsourced models, further increasing our market share. Output from our manufacturing facility in China continued to increase, to record levels, aided by strong regional supplier relationships which we utilised to mitigate global shortages of key components such as integrated circuits. We acted quickly to increase our inventory cover to help offset extended supplier lead times which have almost doubled in the last two years. Earlier in the year, we temporarily increased safety stocks in our sales organisation to ensure product availability and continuity of customer service in an unsettled supply chain. Also key to maximising service to our customers was the investment we made in our UK Distribution Centre to both improve capacity and order fill rates, as well as lowering operating costs. With supply chain uncertainty continuing in 2022, the advantages of our business model position the Group comparatively well to respond rapidly to change.

Strategic progress

Even with the presence of COVID-related challenges, we managed to progress our strategic priorities in the year and to redefine them under three simple headings: Grow, Innovate and Sustain.

Grow

Luceco has a proven track record of growth. Since 2000, we have grown our sales twice as fast as the UK market and supplemented that by launching our successful business model overseas. We now have leading positions of scale in our key UK end markets, and yet have £1.8bn of share still available to us in the markets we currently address. Our strategy is to seize this opportunity.

Given the white space around us, we prioritise our growth opportunities with care and then exploit them in full. Our focus over the last three years has been to maximise the potential of our most profitable source of growth, namely the sale of all existing products to all existing customers through our well-developed UK infrastructure, with a particular focus on growing our share of sales to professional installers. This has proved successful as customers have rewarded our structural ability to deliver, accentuated during the pandemic, with new business that has been very beneficial to profit.

We have used our balance sheet to accelerate share gains with professional installers with the acquisition of DW Windsor, which is highly complementary to our existing UK outdoor lighting offering. We have a decent pipeline of other M&A opportunities at various stages of progression.

Our continual re‐appraisal of growth opportunities led us to invest to accelerate growth in our Southern European business in the year. This will be funded in part by our exit from Northern Europe in 2022, where regrettably the structure of the market has made progress harder and long‐term prospects less attractive than other available opportunities.

Innovate

Luceco also has a proven track record of using innovation to grow. We use it to upsell higher function, higher margin devices in existing product categories, and to enter new product categories that can be sold to existing customers. I am pleased to say we made progress on both fronts in 2021.

4

We expanded our range of USB wiring accessories by being the first in the UK market to integrate high power USB‐C connectivity, which an increasing number of consumer electronic devices use, into mains sockets. We hope this will future‐proof our USB wiring device offering, which has been a very successful product line for the Group. We also expanded our range of consumer Smart Home devices, particularly in lighting. Both are now being sold successfully to our existing customer base.

Our push into new product categories, with a focus on those that are professionally installed, was accelerated by the recent launch of both private realm EV chargers and commercial power products. The market potential of both categories totals £700m in the UK alone and we are very well positioned to take our share of this opportunity. Our lower power Mode 2 EV charger range launched mid‐year, generating sales of £1m. Our higher power Mode 3 charger will launch in early Q2 2022 under our established British General brand and we expect keen interest from our loyal electrical contractor customers.

Sustain

The Group's investment in its infrastructure, to sustain the competitive advantage it has built, bore fruit in 2021. We implemented new software to manage our fulfilment operations, which improved order fill rate, logistics efficiency and delivery capacity. Investment in fulfilment capabilities in the UK has increased output by 40% in five years with no change in footprint. Similarly in Southern Europe, we moved our operations into a larger distribution centre that can support growth (which has averaged 42% per annum over the last five years).

Purpose and culture

Strategies only succeed if they are set within the context of a clear purpose and supportive culture: we have both at Luceco.

Our purpose as an organisation is to bring power into people's lives sustainably. I am proud to say that our products play an expanding role in everyday life and they are increasingly the choice of discerning professional installers who want to get the job done right.

Our products support essential societal climate goals by offering a diminishing carbon footprint and by supporting the adoption of "green" substitution such as LED lighting and EV charging. I am proud to announce that we are targeting annual revenue of £100m from such low carbon products by 2025, underlining both the size of the market opportunity presented to us by decarbonisation, as well as our desire to help society to achieve essential climate goals.

Our culture has come to the fore in the last two years. We have been bold, agile and innovative. Our teams have worked incredibly hard and closely together throughout the customer journey to deliver exceptional service in very trying circumstances. I am very proud of their achievements.

Attractive market backdrop

We estimate the total value of markets we address with our current product portfolio to be worth £2.0bn in the UK alone. Continued expansion into new product categories installed by professional electricians opens up a market worth up to £3.5bn in the UK alone. In short, our markets offer ample room for further growth. They also exhibit healthy, long‐ term growth. We estimate that 80% of our business is driven by RMI construction activity, the majority of which is professionally installed. Since 2000, UK RMI construction has expanded by 16% more than UK GDP and has grown in 18 of the subsequent 21 years.

The events of the last two years have underlined the relative resilience of our markets, a period in which construction has rebounded faster than wider economic activity. I am delighted that consistent growth faster than the competition, means we now have leading positions in such structurally attractive end markets.

John Hornby

Chief Executive Officer

22 March 2022

5